The Death and Life of Great British Cities

Abstract

Does industrial concentration shape the life and death of cities? Using newly constructed data that identify and track English and Welsh cities from the early nineteenth century to the present, we estimate the causal effects of industrial concentration and city size on urban dynamics. We show that greater industrial concentration reduces long-run productivity, conditional on industry-specific trends, consistent with the presence of cross-industry (Jacobs) externalities. We embed these dynamic city-level externalities in a quantitative multi-sector spatial model to evaluate their aggregate and distributional implications. Shutting down Jacobs externalities would reduce today’s North-South productivity divide by over 40%. The model also reveals a dynamic trade-off in the design of spatial clusters: patient policymakers favor diversification, whereas those prioritizing short-run gains favor concentration. Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.

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